Decline of the Empire

Terminal Confusion In The U.S. — The Labor Force

In an oddly titled article Vanishing workforce weighs on growth, Jim Tankersley of the Washington Post starts off like this—

Put out an all-points bulletin: Millions of Americans have gone missing from the workforce.

Every month that those would-be workers are gone raises the odds that they might never come back, dimming the prospects for future economic growth.

The Labor Department reported that the U.S. labor force — everyone who has a job or is looking for one — shrank by 500,000 people in March. That brought the civilian labor force participation rate to 63.3 percent in March, its lowest level since May 1979...

Perplexingly, the driving force behind the decline does not appear to be baby boomers beginning to retire, an event economists have long predicted would shrink the size of the workforce.

It’s people in the prime of their working years, ages 25 to 54, who began tumbling out of the job market in the early 2000s and have continued to disappear during the recovery.

Trends in the U.S. labor force, from RBC Capital Markets via the Financial Time's FTAlpha blog. Labor force participation is falling for all age groups except those who are 55+.

As the charts show, the very disturbing trend Tankersley refers to is crystal clear.

And now, let the terminal confusion begin

That’s obviously bad for those people, who aren’t earning money in any way that would legally require them to pay taxes. It’s also bad for the economy for a simple reason: The fewer workers, the less growth produced.

Breathtaking confusion! Skipping the strange "require them to pay taxes" part, let me rewrite that second sentence so it makes some sense.

It’s also a strong indicator that the American economy sucks: The less growth produced, the fewer workers needed.

The confusion continues.

A smaller workforce reduces what economists call potential gross domestic product, or how much the economy can be expected to expand over the long term. The decade of declining U.S. workforce participation has taken a toll on that potential growth level, many forecasters say. For example, Michelle Meyer, a senior U.S. economist at Bank of America Merrill Lynch, said her real potential growth projections have fallen from 3.25 percent a year in the mid-2000s to 2.25 percent today — all because of the change in participation levels.

We note that "potential gross domestic product" does not exist. The economy is what it is. Lowering "potential growth" based on the dwindling labor force is tantamount to piling one fantasy on top of another. See my post Economic Growth Fantasies.

So, where did everybody go? And if hiring picks up, will they come back?

Good question!

Economists have ideas but not all the answers.

Another breathtaking statement. I could write a book about it.

“Prime-aged people are working less, and we don’t know why,” said Betsey Stevenson, a labor economist and associate professor at the University of Michigan. “I get concerned because there are a lot of people who have useful and productive skills that could really contribute to the economy, and we’re just failing to find ways to get them involved.”

Don't know why?

The easiest explanation for vanishing prime-aged workers is the weak job market: The economy just isn’t creating enough new jobs to keep job-seekers engaged, so many of them are getting frustrated and abandoning their search for work.

In order to pull people back into the workforce, said Heidi Shierholz, a labor market economist at the liberal Economic Policy Institute, “it’s going to take seriously improving job opportunities, and that hasn’t happened yet.”

Ya' think? What was your first clue? Nevermind... Tankersley's article should have been titled Vanishing growth weighs on workforce.

I'll skip some of the analysis and go directly to the Obligatory Hope.

The hope among many economists is that faster growth and stronger job creation will begin to pull people back into the workforce. In that sense, workforce dropouts would be like an idled army, ready to form up again when the cause demands it. That would be good news for the economy: “We don’t think all of these workers are permanently lost,” said Meyer, the Bank of America economist.

Yes, an idled army of Starbucks baristas, Gap retail clerks, Olive Garden waitresses, Wal-Mart associates and poorly compensated manufacturing workers.

Other economists are not so sure. The fear is that the longer people are out of work, the more their skills will erode. Their social networks will atrophy. Gaps in their résumés will scare off potential employers. They would become essentially unemployable.

Evidence is scant that this scenario has set in. But Friday’s numbers reignited concerns. “The idea that labor force participation is structurally or institutionally impaired gains increasing credence with each passing jobs report,” JPMorgan economists wrote in a research note Friday.

The longer the trend goes, the better the odds that’s true.

Excuse my language but it's been nearly five years since the economic meltdown, so how much more evidence do you fucking need?

OK, that ends the terminal confusion, and now I will make a few serious remarks.

Why are more and more people "unemployable"?

To quote George Carlin, "potential" American workers are giving up "on a system that threw them overboard 30 fucking years ago." Let's talk about wages (baristas, retail clerks, etc.). Would you be eager to jump right back into a labor force which will never offer you a living wage? Hell, no! People are losing are heart. Why participate in a system which is fixed against you?

Opportunity? There is no opportunity. For most Americans, there is low-wage slavery and that's all there is. If people can scrounge out a living which doesn't "legally require them to pay taxes," they will surely do so. Many have gone back to school, where they're piling up unpayable student debt or, if they were lucky enough to meet the weakening eligibility requirements, have gone on disability.

In short, Americans are desperately hoping that upgrading their skills will somehow pay off, or they are playing the system. Wouldn't you?

And the Baby Boomers? They're not retiring (graphs above). They can't! They have to keep working. For many of the others, those aged 20-54, especially the youngest, America is not a viable enterprise. For them, it's a meat grinder.

This new America is the wholly predictable product of 35 years of fraud, corruption and greed. Americans are getting used to the new reality because they know it ain't going away anytime soon.

As for writers at the Washington Post, and economists of all stripes, forget about them—they are utterly hopeless. They don't have the faintest clue about what's really going on here. And that's nothing new.

DOTE Has No Natural Constituency

Some time ago, on a slow day, I made this simple graphic.

What was I thinking?

The world is simpler than it appears. My observations of it indicate that humans can be neatly divided into two groups, optimists and pessimists. The vast majority of humans are optimistic by nature, and when I say "optimistic" in this post, I am talking about those who are sanguine about the human future, regardless of any current problems, and regardless of any worrisome ongoing trends. In extreme cases, as with technological optimists, they are actually excited about our bright future regardless of current problems and disturbing trends.

In a recent post Humans Are Clueless About Themselves, I noted that "optimism bias" has actually been found in the brain.

In a series of experiments, [neuroscientist Tali] Sharot thas identified a region in the brain that seems to be responsible for this bias. She temporarily disables this region using a magnetic field and then asks people what they think. The bias disappears. People stop being overly optimistic. They start to take risks seriously.

This is a remarkable finding which confirms to some degree my strong suspicion that optimism is built right into humans at the genetic level. Turn over any rock on this planet, and  you will almost invariably find an optimist. I see that proposition confirmed by observation over and over again.

If optimism is innate in humans, you would expect that there will be a class of exceptions to the general rule because the complex combination of biological determinants which give rise to this trait is bound to "fail" in some individuals (via mutation or genetic switches or whatever). And that's exactly what we find.

Thus we have a much, much smaller group of pessimists whom I call "Doomers". I defined that group in my post Contemporary Eschatology. Pessimists are not rare, but they make up a very small percentage of the general population (< 0.5%).

Of course, you wouldn't know that if you do this youtube search. Pessimists may be infrequent in the general population, but they are vocal attention seekers. (Maybe that's due to the frustration of being a pessimist in an optimistic world.)

Whereas the optimist sees a bright future, the pessimist sees no future at all. Literally. The pessimist is waiting around for the collapse of everything, which will occur any day now. Sometimes they wait for decades.

Thus we see that optimists and pessimists might be regarded as two sides of the same genetic coin. I came to this conclusion through my observations of the world and my experience writing this blog.

Now, you will have noticed that there is a third group in my simple graphic whom I called "Realists". Also note the text not drawn to scale. If the graphic were drawn to scale, the realists would be invisible, and even the pessimists would be very hard to see

The people in this group have neither an optimism bias nor a pessimism bias. Realists look at the current problems and the worrisome trends, and make a considered judgment about the human future based on the evidence available. Only realists can assess risk correctly, for they lack the bias which colors the judgments of all the others.

If all the foregoing is correct, you would expect that realists are very rare indeed. Out of world population of 7+ billion people, I'm guessing there may be several thousands of them. Assuming there are 10,000 "realists" on Earth, this group would make up 0.00015% of the general human population.

In the context of the foregoing, you can readily see that realists make themselves. They are not born that way. And so it was with me. I am a recovering optimist.

And now, I'll return to my original question — what was I thinking when I made that graphic?

I was thinking that DOTE has no natural constituency, for I am a realist, and realists are very rare indeed.

Bonus Video — An old favorite. Some realist made this. That person obviously had a sense of humor. A rich sense of humor is the sine qua non of the realist.

 

Philippe Cousteau, Environmental Advocate

The ocean can and should be a source of hope and solutions for a brighter future
  — Philippe Cousteau, environmental advocate

 

 

Philippe Cousteau, special correspondent for CNN International, and grandson of Jacques Cousteau, began his essay Oceans: Environmental victim or savior? like this:

My grandfather Jacques Cousteau and my father Philippe dedicated their lives to revealing the ocean's wonders and helping us understand our connection to this vast expanse of water. Their work inspired generations and filled people with awe.

Times have changed and so have circumstances and perceptions about the ocean. In recent years, the focus has been on the very serious challenges the ocean faces and the impact these challenges are already having on our daily lives.

The effects of climate change, pollution and overfishing should be making headlines because the ocean and all of us — and I literally mean all humankind — who depend on its resources are facing the very real prospect of the catastrophic collapse of ocean ecosystems if we continue on our current course.

Despite the challenges our ocean faces, I believe it's time to recapture the sense of wonder and inspiration my grandfather and father felt when they gazed on its surface. In fact, the ocean can and should be a source of hope and solutions for a brighter future.

Now, I want you to pause for a moment to savor the irony of noting the "very real prospect of the catastrophic collapse of ocean ecosystems" in one paragraph, and then saying "the ocean can and should be a source of hope and solutions for a brighter future" in the next paragraph.

For if the oceans are facing catastrophic collapse, and it's not hard to figure out why, and the causes of that eventual collapse have not changed, how can those same oceans be a source of hope and solutions for a brighter future?

Have you seen the irony? Good. I followed the collapse link, which led me to CNN's Overfished and under-protected: Oceans on the brink of catastrophic collapse. I will quote liberally from that article.

Remoteness, however, has not left the oceans and their inhabitants unaffected by humans, with overfishing, climate change and pollution destabilizing marine environments across the world.

Many marine scientists consider overfishing to be the greatest of these threats. The Census of Marine Life, a decade-long international survey of ocean life completed in 2010, estimated that 90% of the big fish had disappeared from the world's oceans, victims primarily of overfishing...

In some cases, the collapse has spread to entire fisheries. The remaining fishing trawlers in the Irish Sea, for example, bring back nothing more than prawns and scallops, says marine biologist Callum Roberts, from the UK's York University.

A smear of protein.

"Is a smear of protein the sort of marine environment we want or need? No, we need one with a variety of species, that is going to be more resistant to the conditions we can expect from climate change," Roberts said.

The situation is even worse in Southeast Asia. In Indonesia, people are now fishing for juvenile fish and protein that they can grind into fishmeal and use as feed for coastal prawn farms. "It's heading towards an end game," laments Roberts.

Trawling toward disaster, bulldozing the ocean bottom.

One particular type of fishing, bottom-trawling, is blamed for some of the worst and unnecessary damage. It involves dropping a large net, around 60 meters-wide in some cases, into the sea and dragging it along with heavy weights from a trawler.

[Image left — click to enlarge, source]

Marine conservationists compare it to a bulldozer, with the nets pulled for as far as 20km, picking up turtles, coral and anything else in their path. The bycatch, unwanted fish and other ocean life thrown back into the sea, can amount to as much as 90% of a trawl's total catch.

Upwards of one million sea turtles were estimated to have been killed as by catch during the period 1990-2008, according to a report published in Conservation Letters in 2010, and many of the species are on the IUCN's list of threatened species.

Campaigners, with the support of marine scientists, have repeatedly tried to persuade countries to agree to an international ban, arguing that the indiscriminate nature of bottom-trawling is causing irreversible damage to coral reefs and slow-growing fish species, which can take decades to reach maturity and are therefore slow to replenish their numbers.

Because they can.

"It's akin to someone plowing up a wildflower meadow, just because they can," says Roberts. Others have compared it to the deforestation of tropical rainforests.

Bottom-trawling's knock-on impacts are best illustrated by the plight of the deep-sea fish, the orange roughy (also known as slimeheads) whose populations have been reduced by more than 90%, according to marine scientists.

Orange roughys are found on, or around, mineral-rich seamounts that often form coral and act as feeding and spawning hubs for a variety of marine life.

"Anywhere you go and try to harvest fish with a trawl you are going to destroy any coral that lives there, and there is example after example of the damage that is done by trawlers," says Ron O'Dor, a senior scientist on the Census of Marine Life...

Essential ecosystem services, the pointlessness of economics.

At the same time fisheries and vital marine ecosystems like coral are being decimated, the oceans continue to provide vital services, absorbing up to one third of human carbon dioxide emissions while producing 50% of all the oxygen we breathe.

But absorbing increasing quantities of carbon dioxide (CO2) has come at a cost, increasing the acidity of the water.

"The two worst things in my mind happening to oceans are global warming and ocean acidification," says O'Dor, "They're going to have terrible effects on coral reefs. Because of acidification essentially, the coral can't grow and it's going to dissolve away."

The ocean has become 30% more acidic since the start of The Industrial Revolution in the 18th century and is predicted to be 150% more acidic by the end of this century, according to a UNESCO report published last year...

"There's a real lack of public and political awareness of these issues," says Alex Rogers, professor of conservation biology at the UK's Oxford University.

"They're too big to understand in economic terms. We can put a value on the loss of fishing, but how can we put a value on oxygen production or the absorption of carbon dioxide?" he says.

There's no need to further explain any of this stuff. If you require further explanation, you're far too dense to be reading DOTE. The oceans "should" be a source of hope and solutions for a brighter future, but they are not, and the reason they are not is as plain as the nose on your face.

Personal Note

I started by asking you to savor the irony of Cousteau's Obligatory Hope as the oceans face eventual catastrophic collapse in the 21st century. Now I want to consider another irony, one which affects me personally in a profound way.

It is not lost on me that my target audience is made up of the very same humans who are fucking up the oceans, the climate, other animal species, and just about everything else, including their self-created economy. Thus, in all but a few cases, my warnings, my insights about human behavior, my descriptions of the science and evidence, and all the rest will fall on deaf ears. The essential craziness and hopelessness my "mission" on DOTE is not lost on me. But then again, how are we to spend our precious time on Earth? Writing this blog was my choice.

Now, for the relatively few people who read this blog, there are two ways to go—you can make my job easier, or you can make it harder. If the former, I am grateful. If the latter, congratulations! — you are part of the human mess I go to great lengths to describe.

The comments you make, the donations you do or do not send, the links to DOTE you put up on other web sites, the recommendations of DOTE you make to others—all these things make a difference to me. All I can do is write this blog, which is unique on the internet in many ways. And once this blog is gone, it is very likely that nothing will replace it.

The rest is up to you.

Don't Mess With Dr. Zhang!

He's got the blue lab coat on. He's wearing glasses. He's surrounded by beakers and test tubes and mysterious machines. He's got a Nobel Prize in his future.

Meet Dr. Y. H. Percival Zhang, scientist [left].  He's an associate professor of biological systems engineering in the College of Agriculture and Life Sciences and the College of Engineering at Virginia Tech.

By definition, genuine technological breakthroughs, actual gamechangers, are rare. But they do happen, the trick being to recognize when a breakthrough occurs.

In recent years, we've heard about all sorts of alleged breakthroughs in energy science & technology which, upon closer inspection, turned out to be duds which never surface again. Liquid fuels from algae and other wonders of synthetic biology. Fusion reactors. Super-efficient solar cells. Empty promises.

But when I read Science Daily's Breakthrough in Hydrogen Fuel Production Could Revolutionize Alternative Energy Market, I knew that we were looking at the Real Deal.

A team of Virginia Tech researchers has discovered a way to extract large quantities of hydrogen from any plant, a breakthrough that has the potential to bring a low-cost, environmentally friendly fuel source to the world.

Zhang and his team have succeeded in using xylose, the most abundant simple plant sugar, to produce a large quantity of hydrogen that previously was attainable only in theory. Zhang's method can be performed using any source of biomass.

This new environmentally friendly method of producing hydrogen utilizes renewable natural resources, releases almost no zero greenhouse gasses, and does not require costly or heavy metals. Previous methods to produce hydrogen are expensive and create greenhouse gases.

In short, don't mess with Dr. Zhang!

For seven years, Zhang's team has been focused on finding non-traditional ways to produce high-yield hydrogen at low cost, specifically researching enzyme combinations, discovering novel enzymes, and engineering enzymes with desirable properties.

The team liberates the high-purity hydrogen under mild reaction conditions at 122 degree Fahrenheit and normal atmospheric pressure. The biocatalysts used to release the hydrogen are a group of enzymes artificially isolated from different microorganisms that thrive at extreme temperatures, some of which could grow at around the boiling point of water.

The researchers chose to use xylose, which comprises as much as 30 percent of plant cell walls. Despite its abundance, the use of xylose for releasing hydrogen has been limited. The natural or engineered microorganisms that most scientists use in their experiments cannot produce hydrogen in high yield because these microorganisms grow and reproduce instead of splitting water molecules to yield pure hydrogen...

You Doomers pessimists may have the usual objection about energy returns ... well, get over it...

The energy stored in xylose splits water molecules, yielding high-purity hydrogen that can be directly utilized by proton-exchange membrane fuel cells.

Even more appealing, this reaction occurs at low temperatures, generating hydrogen energy that is greater than the chemical energy stored in xylose and the polyphosphate. This results in an energy efficiency of more than 100 percent — a net energy gain.

That means that low-temperature waste heat can be used to produce high-quality chemical energy hydrogen for the first time.

Other processes that convert sugar into biofuels such as ethanol and butanol always have energy efficiencies of less than 100 percent, resulting in an energy penalty.

The chief obstacle to the so-called hydrogen economy has been the difficulty and energy cost of producing the hydrogen.

Hydrogen is likely to be a part of [an] idealistic future, and possibly an important part. A hydrogen molecule [H₂] in the presence of oxygen can be converted to water with a release of heat and work. It is difficult to imagine a cleaner energy source.

However, there are challenges. To begin with, molecular hydrogen does not occur naturally in high concentrations; it is only 0.00005% of the air. Hydrogen is normally bound in other molecules, water and hydrocarbons being the most common. Unlike natural gas, molecular hydrogen is not found in large accumulations in geologic strata, either.

This means that hydrogen is not a primary fuel source. Like electricity, it is a means for transmitting energy from primary fuel sources to users. Like electrical power, hydrogen must be produced and transported, although hydrogen has an additional attribute that makes it more attractive for some applications than electricity: it can be stored for later use. This feature makes it useful for powering vehicles and other portable devices.

Current production of hydrogen is about 50 Mt/year [55 million US tons/yr], mostly for industrial purposes in chemical and petrochemical applications. A world economy using hydrogen as a major energy carrier will require a tremendous increase in that volume, as well as a complex new infrastructure for transporting and delivering hydrogen to end users...

Zhang has solved the first problem, the supply problem, at least in the laboratory. But what about commercial viability and scalability? There is optimism, of course.

Hydrogen is conventionally produced by steam reforming natural gas, a process that wastes some of the energy stored in the gas while releasing large amounts of CO2. Zhang’s discovery is endorsed by Jonathan R. Mielenz, the group leader of the bioscience division at the Oak Ridge National Laboratory:

“The key to this exciting development is that Zhang is using the second most prevalent sugar in plants to produce this hydrogen,” Mielenz told VT. “This amounts to a significant additional benefit to hydrogen production and it reduces the overall cost of producing hydrogen from biomass.”

Mielenz predicts Zhang’s process could reach the existing $100 billion hydrogen marketplace in three years. It could achieve a potential of a trillion dollar market in the US alone.

We shall see, but there don't seem to be any major obstacles in the way.

The second problem with implementing a hydrogen economy is that the production facilities, the transport and delivery infrastructure, and the demand side of the market (e.g. end users driving cars using fuel cells) basically do not exist, outside  a few experiments.

That is not a small problem. If no showstoppers are encountered, I guestimate that it will take humankind about 50 years to implement a hydrogen economy at the scales required to replace most of the energy we get from fossil fuels. This project would constitute the world's biggest stimulus package, with a big payoff at the end. This would be one of those global "Manhattan Projects" you hear about all the time. Unfortunately, the effort itself would require huge expenditures of energy from fossil fuels, and the Earth's ecological health will be deteriorating that entire time. So we don't have 50 years. In fact, we don't have 10 years if we're going to prevent catastrophic warming of the Earth's surface.

And then there are all the human (as opposed to the economic, energy, engineering) problems with implementing a global hydrogen economy within 50 years. In case you haven't heard the bad news, human beings are fuck-ups. Humans think they're hot stuff, but they can fuck up a wet dream, and usually do. I can think of a million reasons why we'll never see a hydrogen economy at the scales required.

So dream on.

But nevermind. Technological breakthroughs do happen. Hydrogen just got a lot cheaper to produce, thanks to Y. H. Percival Zhang.

How Do They Live With Themselves?

In Friday's post, I put up a video of a PBS interview with veteran journalist Hedrick Smith, the author of Who Stole The American Dream?  Examining Smith's timeline, it is quite obvious who stole it.

1981 — President Reagan pushes through tax cuts that heavily favor the wealthy, dropping the top personal income tax rate from 70 percent to 28 percent, the capital gains rate from 28 percent to 20 percent, and the corporate rate from 46 percent to 35 percent. The Reagan tax cuts add $1 trillion in income for the super rich 1 percent during the 1980s, and another $1 trillion in each successive decade. The Forbes 400 Richest Americans triple their net worth between 1978 to 1990, thanks to the Reagan tax cuts.

1982 — President Reagan persuades Congress to pass a law authorizing the exotic loans that will become the hallmarks of the 2000s housing boom. The law permits loans never previously allowed: adjustable rate mortgages, or ARMs, with ballooning interest rates, 100 percent financing;;  and  “negative  amortization” that permits banks to charge high fees and interest rates and allow minimal payments, causing many people to go deeper into debt, and stripping equity out of many homes.

There's a a lot more where that came from, and Smith's timeline is not complete. For example, it does not include the repeal of Glass-Steagall, which was bundled into some huge, pork-ridden bill as 1999 ended, and was signed into law by lame duck Bill Clinton in January, 2000. And who was behind the repeal? Larry Summers, who served as Obama's chief economic adviser, Alan Greenspan, who needs no introduction, and Bob Rubin, the Democrat's favorite Wall Street guy. And to be clear, Tim Geithner, who served as Secretary of The Treasury (and later chief economic adviser) throughout Obama's first term, was a protege of these Great Men.

I think we can agree about who stole the American dream and how they did it—lobbyists, money in politics, special interests, abject corruption, etc. Historically, this is nothing new, and if you're awake, you know these problems are getting worse, not better (e.g. Citizens United).

But this post is about the Public Broadcasting Company, or as someone joked in a comment on DOTE, the Petroleum Broadcasting Company. PBS (and their radio cousin NPR) routinely covers national politics in tedious, over-kill detail, often featuring little else. Ray Suarez, Gwen Ifill and the rest seek to fill our minds with Washington rubbish day after day, week after week, year in and year out.

The question on the table is: How do the the people working at PBS live with themselves?

On the one hand, we've got Hedrick Smith's exhaustive demonstration that the very political system which PBS covers wrecked millions and millions of American lives. On the other hand, we've got the intrepid reporters of PBS interviewing Smith, and then smoothly moving on to cover the very political system which was reponsible for the damage, all of which took place over the last 30-40 years.

It's as if the lessons of history and Smith's conclusions about them no longer existed one minute after the PBS interview with Smith ended.

I will make the obvious point—if we fully grasp those lessons and conclusions, then the political system in the United States can not be legitmate. Cleary, that system is no longer a democracy because the interests of the vast majority of the Amercian people have been thrown under the bus to accomodate the interests of the big banks and other big corporations, as Smith makes clear.

Yet PBS seeks to confer legitimacy on our faux democracy every day. They do so by talking about it as if history never happened. They do so by talking about it as if re-election money and other favors are not being bestowed upon politicians every day. They do so by pretending that legislators and their staffs, not special interest lobbyists, always write the bills which become law.

Moreover, you needn't adopt a moral stance to see the contradictions.

If you want to fully grasp the Human Condition, and what goes on in America in particular, you've got to be able to explain this bizarre behavior. Here are some of the hypotheses you need to consider, in no particular order.

a)   PBS is just as corrupt as the political system they cover (e.g. coverage of this oil spill was brought to you by British Petroleum). Such corruption need not be conscious; the people at PBS are simply unable to acknowledge the connection between what they do and where the money comes from.

b)   There is no apparent contradiction for the people at PBS because humans routinely use the classic defense mechanisms to be able to live within the contradiction. In this case, rationalization, denial and compartmentalization come to mind.

c)  Humans generally are merely a product of their immediate environment, and in the case of PBS, they are entirely molded at the national level by the Imperial Capital, from which all their nightly broadcasts emanate. In so far as the mandarins and movers & shakers Inside The Beltway will not be acknowledging their illegitimacy anytime soon, PBS will not be acknowledging it either.

d)  It is a truly a matter of existence, i.e. the survival of the group. As with any other human group, including complex organizations like PBS, the group is held together by shared beliefs and a mission. If those beliefs and mission are not legitimate, the group can not cohere (exist). At this basic level, it becomes literally unthinkable to destroy their own sense of purpose (and thereby their very existence) by acknowledging the essential illegitmacy of those beliefs and that mission. They would literally have no reason to exist. And course if they were to start dwelling on America's political illegitimacy, they would lose their funding and status in society, i.e. they would become marginalized. Thus they remain committed and faithful lapdogs of the powerful.

e) The people at PBS simply don't care that the corrupt political system they cover has thrown millions and millions of Amercans under the bus. These self-important journalists have got jobs, right? These busy people view themselves as invaluable contributors to American society.

I am not asking you to choose among these hypotheses. To some extent or another, they all provide an answer to the question how do the the people working at PBS live with themselves?

To become sane and stay sane on this planet,  you must come to terms with essential contradictions in the Human Condition which are manifest in the world presented to you. Humans assume (pretend) they have constructed a well-ordered world governed by rationality and adherence to reality, whereas the opposite is far more often the case.

The constructed human world has its own internal "logic" but that "logic" does not follow the strict rules of science and mathematics. That world is psychological in nature, and springs forth entirely from the human animal itself. That world is not internally consistent, and is full of absurdities (easily derivable contradictions, i.e. propositions P and not-P are both held in the mind at the same time).

In the past I've used the world "crazy" to describe the Human Condition. Perhaps this small post will give you some sense of what I mean by that.

Remedy du Jour -- April 6, 2013

In yesterday's post I talked about the University of Colorado's Conference on World Affairs, but I didn't mention the music. Jazz pianist and composer Dave Grusin is a graduate of CU, and most years he would show up with a bunch of great musicians, including his younger brother Don, who also went to CU, and is also a jazz pianist. Whatever impromptu band showed up that year would play several concerts during the week, which was certainly one of highlights for me. Today I'll feature a few film clips from the CWA and feature Dave's less known brother Don. Enjoy.

• Lincoln Boulevard (part I)  — Don Grusin and friends at the 2010 CWA (and see part II).
• She Could Be Mine — the Grusin boys, Nelson Rangell and others
• Yin & Yang — pianist Patrick Leonard athe 2009 CWA
• Catwalk — Don Grusin and friends
• Song For Bilboa — all-star band at the 2011 CWA, a Pat Metheny tune

 

 

 

 

 

Roger Ebert, The CWA And The American Dream

Renowned film critic Roger Ebert died yesterday at the age of 70. He'd been battling cancer for years, and the cancer came back one time too many.

I remember Ebert well. In 1970, when he was a young man working for the Chicago Sun-Times, Ebert was invited to participate in the University of Colorado's Conference On World Affairs (CWA), a week-long event he would attend for the next 40 years. I attended that conference from about 1997 until 2006, when I left Boulder and moved back to Pittsburgh, where I had grown up.

I talked to Ebert several times over those years; he was a familiar figure to lots of people at CU during the 2nd week of April. He was argumentative, opinionated, outspoken and always entertaining. I liked Ebert. He loved going to those conferences, where he got to talk about all sorts of things, not just films. Every year he presented a "Cinema Interruptus" in which a film Ebert selected could be picked apart by hundreds of "critics" sitting in the dark in CU's Mackey Auditorium [image top left]. I remember the year we watched Dark City, which was my favorite over the years.

Ironically, Ebert died on the eve of this year's conference, which begins Monday April 8. He last attended the CWA in 2010.

The keynote speaker at this year's CWA is Hedrick Smith, the author of Who Stole The American Dream? I have not read the book, but it appears that it documents in great detail the dismantling of America's middle class over these last 40 years. For example, Smith compiled a long timeline of important but often unheralded crimes like these—

1978 — Two major bills alter the economic landscape for decades to come. One is an obscure insert in the tax code, paragraph 401(k), initially intended to authorize supplemental executive retirement plans and later extended by the Reagan administration to rank and file workers. The other change updates U.S. bankruptcy laws, giving management control during corporate bankruptcy, paving the way for bankruptcies in the 1990s and 2000s that canceled provisions of union contracts.

1980 — Congress passes a deregulatory bill that overrules state usury laws and effectively abolishes limits on interest rates for first mortgages, paving the way for the future subprime mortgage boom.

1981 — President Reagan pushes through tax cuts that heavily favor the wealthy, dropping the top personal income tax rate from 70 percent to 28 percent, the capital gains rate from 28 percent to 20 percent, and the corporate rate from 46 percent to 35 percent. The Reagan tax cuts add $1 trillion in income for the super rich 1 percent during the 1980s, and another $1 trillion in each successive decade. The Forbes 400 Richest Americans triple their net worth between 1978 to 1990, thanks to the Reagan tax cuts.

1982 — President Reagan persuades Congress to pass a law authorizing the exotic loans that will become the hallmarks of the 2000s housing boom. The law permits loans never previously allowed: adjustable rate mortgages, or ARMs, with ballooning interest rates, 100 percent financing;;  and  “negative  amortization” that permits banks to charge high fees and interest rates and allow minimal payments, causing many people to go deeper into debt, and stripping equity out of many homes.

This is only a small sample of the timeline, which starts in 1913 and ends in 2011-2012. If you want to know who stole the American dream, Smith is going to tell you exactly who did it and how they did it. Historical events like these speak for themselves. I don't usually talk about the past in such great detail. I prefer to take America's past for what it is, and talk about the toxic fall-out. Probably I assume too much. Only a person who is ignorant of the past 40 years, or a person who can not discern the meaning of our recent history, or one of the winners, could possibly think America is not fucked up beyond all repair (FUBAR).

Here's another one.

1973 — The productivity of U.S. workers rises 96 percent since 1945, and average hourly compensation rises in tandem—94 percent from 1945 to 1973. Average Americans share in the  nation’s  prosperity.

In the next three decades, from 1973 to 2011, worker productivity rises another 80 percent but hourly compensation rises only 10 percent. Ordinary Americans are cut out of their share of the  nation’s economic gains.

In this historical context, does it really matter what the latest jobs numbers are? Does it matter how retail sales did last month? It does not.

That's why I loved the Conference on World Affairs. And Roger Ebert was always a big part of that conference. I miss attending the conference, and I'll miss Ebert too.

Below we have Smith being interviewed about the book on PBS on October 1, 2012. The PBS conversation is a bit dry, and doesn't quite capture the spirit of the America's fall from grace, so I've also included a George Carlin classic.

Have a nice weekend.

 

 

Life-Like Autonomous Robot Jellyfish!

There are lots of things humans don't do well, or can't do at all. They can't stop killing each other. They can't create and maintain a complex society which doesn't have sorts of inequality and unfairness built right into it. They can't stop themselves from killing off other species and destroying the ecosystems large & small upon which they depend. They can't stop making babies unless they're also consuming all sorts of stuff. Speaking of stuff, they certainly can't stop themselves from consuming lots of it, given the means and opportunity to do so, etc., etc., etc.

It's a long list. But By God...

... humans can build a life-like autonomous robot jellyfish like nobody's business!

Virginia Tech College of Engineering researchers have unveiled a life-like, autonomous robotic jellyfish the size and weight of a grown man, 5 foot 7 inches in length and weighing 170 pounds.

The prototype robot, nicknamed Cyro, is a larger model of a robotic jellyfish the same team — headed by Shashank Priya of Blacksburg, Va., and professor of mechanical engineering at Virginia Tech — unveiled in 2012. The earlier robot, dubbed RoboJelly, is roughly the size of a man's hand, and typical of jellyfish found along beaches.

"A larger vehicle will allow for more payload, longer duration and longer range of operation," said Alex Villanueva of St-Jacques, New-Brunswick, Canada, and a doctoral student in mechanical engineering working under Priya. "Biological and engineering results show that larger vehicles have a lower cost of transport, which is a metric used to determine how much energy is spent for traveling"...

Damn! This larger jellyfish allows for more payload, not to mention longer duration and a longer range of operation. Seriously, could we ask for anything more?

Jellyfish are attractive candidates to mimic because of their ability to consume little energy owing to a lower metabolic rate than other marine species. Additionally, they appear in wide variety of sizes, shapes and colors, allowing for several designs. They also inhabit every major oceanic area of the world and are capable of withstanding a wide range of temperatures in both fresh and salt waters. Most species are found in shallow coastal waters, but some have been found in depths 7,000 meters below sea level...

How does the robot swim?

Good question!

Its body consists of a rigid support structure with direct current electric motors which control the mechanical arms that are used in conjunction with an artificial mesoglea, or jelly-based pulp of the fish's body, creating hydrodynamic movement.

With no central nervous system, jellyfish instead use a diffused nerve net to control movement and can complete complex functions. A parallel study on a bio-inspired control system is in progress which will eventually replace the current simplified controller. As with the smaller models, Cyro's skin is composed of a thick layer of silicone, squishy in one's hand. It mimics the sleek jellyfish skin and is placed over a bowl-shaped device containing the electronic guts of the robot. When moving, the skin floats and moves with the robot, looking weirdly alive.

Weirdly alive. The robot jellyfish is modeled after the so-called "natural" jellyfish Cyanea capillata, also called the Lion's Mane jellyfish.

A curious yet cautious diver approaches a lion’s mane jellyfish off the British Columbia coast. The tentacles that make up this jelly’s “mane” can deliver a painful and even potentially fatal sting. But such toxins don’t deter several fish species from feeding on the ample bulk of the cold water-loving jellyfish. Source: National Geographic

But seriously, things are looking grim. Homo sapiens may not see the close of the 21st century. Why on Earth would humans want to build a robotic jellyfish in the first place? The Los Angeles Times has the answer.

But why make a robotic jellyfish in the first place?

The researchers at Virginia Tech – along with colleagues at at UCLA, Stanford University, Providence College in Rhode Island and the University of Texax at Dallas – have a $5-million grant from the U.S. Naval Undersea Warfare Center and the Office of Naval Research to develop autonomous robots that can ply the oceans.

Robotic jellyfish like Cyro could one day conduct undersea military surveillance. They might also be deployed to monitor the environment or clean up oil spills.

Well ... uhhhh ... are those good reasons? ... I mean ...  hmmm ... I don't know about this ... don't we have better things to do?

But that's not the gung-ho spirit we're looking for here.

Why climb that mountain? Because it's there! Why fuck up the oceans? Because they're there!

Why build a life-like autonomous robot jellyfish? Because we can! We love it, and we're good at it too!

Technology is the hammer, and to humans, everything looks like a nail.

You might take a look at my post The Limits Of Free Will In Human Action, but don't worry about this stuff because...

It's all good.

 

Reactions To David Stockman's Editorial

Last Sunday the New York Times published an editorial by David Stockman called State-Wrecked: The Corruption of Capitalism in America. Stockman is a former congressman, and after that he served as Ronald Reagan's budget director until 1985, when is resigned in protest of "the destruction of fiscal rectitude" (his words). I've had occasion to feature Stockman on DOTE from time to time because he is one of the "good guys" who understand why America has failed economically.

Stockman's editorial was over-the-top. He strayed into what I would call "Doomer" territory, predicting that this latest bubble in the stock market will crash within a few years—that isn't (or shouldn't be) controversial—but also asserting that the U.S. economy will collapse as a result. He concluded with this—

When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is.

Stockman also puts forward a questionable economic history of the United States starting with Roosevelt and the Great Depression. In fact, that historical account takes up the bulk of his long editorial. I should also mention that Stockman is trying to sell his new book The Great Deformation: The Corruption of Capitalism In America. So much of what we read or hear is somebody selling their book, both literally and figuratively.

I will comment further on Stockman's views at the end, but for now, lets look at the reactions of others to the editorial, for that's the interesting part of this exercise. If Stockman's editorial was over-the-top, so were the reactions to it. I'll quote from Skeptics Scoff at David Stockman’s Doomsday Scenario.

His call has been ridiculed by academics, investors and economists of all stripes. Mark Thoma, economics professor at the University of Oregon, gives Stockman what he calls “the wingnut of the day award.”

Princeton economist Paul Krugman calls Stockman a cranky, old man:

“Actually, I was disappointed in Stockman’s piece. I thought there would be some kind of real argument, some presentation, however tendentious, of evidence. Instead it’s just a series of gee-whiz, context- and model-free numbers embedded in a rant — and not even an interesting rant. It’s cranky old man stuff…Sad.”

Jared Bernstein, who was an economic adviser to the Obama administration from 2009 to 2011, says Stockman’s analysis “is mostly a horrific screed, an ahistorical, dystopic, Hunger-Games vision of America based on debt obsession and willful ignorance of macroeconomics and the impact of market failure.” From Bernstein:

“I suspect most readers will react the way I did: it’s like hearing a crazy person on a street corner ranting against whatever: they invariably stumble on some profound and piercing insights, but it’s mostly nonsense, and instinctually, we keep our heads down and move on.”

That's only a small sample of the scathing ridicule Stockman received. For example, Joe Weisenthal of the sensational content mill The Business Insider wrote an attack piece with the self-explanatory title David Stockman Writes Huge Unhinged Screed About How America Is Doomed And How You Should Get Out Of The Market NOW. There will be more rancor in the days and weeks to come.

Stockman is a former establishment figure who has betrayed the Powers That Be, which explains some of the reaction. But that fact in itself does not explain the ferocity of the attack on Stockman. Those putting him down were more unglued than he was in the editorial.

There is much at stake for those deeply vested in (or running) this failed enterprise called the United States. It comes down to this—

• The indefensible must be defended at all costs. The illusion that the U.S. economy has not failed must be maintained. The illusion that the economy is merely experiencing growing pains during the "recovery" must be maintained. The illusion that we will soon be on the road to greater prosperity for all must be maintained. These are the necessary illusions Americans are supposed to swallow. This is the kool-aid.

• The bearer of bad news (Stockman) must be marginalized to help manage these perceptions.

Stockman's main points about the economy are (or should be) uncontroversial. He believes the bailed-out financial sector and other large non-financial corporations dominate American economic policy (check). He believes that there is a firewall between the prospering Wall Street economy and the dilapidated Main Street economy (check). He believes gambling has replaced investment (check). He believes that corrupt "crony capitalism" has replaced functioning markets (check).

I'll quote from the early part of Stockman's editorial. This excerpt summarizes the indefensible that must be defended at all costs.

Since the S.&P. 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually.

Real median family income growth has dropped 8 percent [graph below], and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

Graph from Sentier Research (February 2013). I added the dashed trend line and notes.

Any mainstream figure (like Stockman) who dares to question whether the United States is a viable enterprise going forward must be marginalized by the elites (i.e. those representing them) to maintain the necessary illusions. Otherwise, American politics has no meaning—it does not—and mainstream discussions of the economy are entirely worthless—they are. Here's Stockman again.

The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.

The Democratic Keynesians, as intellectually bankrupt as their Republican counterparts (though less hypocritical), had no solution beyond handing out borrowed money to consumers, hoping they would buy a lawn mower, a flat-screen TV or, at least, dinner at Red Lobster...

And so on. If you are not brain-dead, and if you are not heavily vested in the economic status quo, the essential truth of these colorful statements is indisputable.  But Mark Thoma, Paul Krugman, Jared Bernstein, Joe Weisenthal, and other representatives of the status quo are dedicated to propping up the illusions by which Americans are meant to be guided.

It is truly unfortunate that Stockman did not stick to "the basics" in making his attack on the current economic and political regime. By getting very doomerish, he opened himself up to the kind of attacks and subsequent marginalization he is now experiencing. He overreached, and is now suffering the consequences. Furthermore, he is talking his book, which does not help him make his case.

Regarding Stockman's prediction of a collapse once the current stock market bubble crashes, I do not think that outcome is likely. As far as I can see, the only reason offered for this conclusion is stated here—

If and when the Fed — which now promises to get unemployment below 6.5 percent as long as inflation doesn’t exceed 2.5 percent — even hints at shrinking its balance sheet, it will elicit a tidal wave of sell orders, because even a modest drop in bond prices would destroy the arbitrageurs’ profits. Notwithstanding Mr. Bernanke’s assurances about eventually, gradually making a smooth exit, the Fed is domiciled in a monetary prison of its own making.

Most Americans don't care about treasury bond yields and prices—traders care. Certainly the stock market will undergo a large "correction" at some point in the next few years—this is a new bubble, after all—but why would that drop in stock values affect the Main Street economy? Most ordinary Americans are not in the market, of course, and losing value in inflated pension funds is nothing new. We experienced these things in 2008/2009. The Main Street economy is already hosed, and will remain that way. Raising interest rates may slow down the rate of new borrowing for cars or houses, but so what? Sales for new homes and cars are already at historically low levels, although "consumer" demand was lower four years ago.

In short, most Americans won't be able to tell the difference if the Fed stops perpetual QE and raises interest rates.

Things will get worse for ordinary Americans if we have another deep recession, but that's a far cry from a collapse. You can't take away what people do not have, although things can get worse on the margins—fewer new jobs, more wage declines, more people on food stamps, etc.

In fact, it's hard to see how Main Street America will be affected at all if the Fed "hints at shrinking its balance sheet." This conclusion simply follows from the fact that there is an impenetrable firewall between the Wall Street and Main Street economies,as Stockman already knows.

Stockman also believes that when the stock market crash occurs, the Big Money Boys will not be bailed out, but why wouldn't they be bailed out? No reasons are offered. The big corporations (both banks and non-financial) run the show. The elites running these organizations are the puppeteers, and of course they're going to be bailed out by their hand puppets at the Fed or the Congress or the Treasury, or some combination of these.

Nonetheless, and despite the fact that Stockman let his passions rule him, I am here to praise him, not to bury him. The vehement, mean-spirited reactions to his editorial only serve to emphasize his basic points about how things are going in the United States. I have referred to the Bubble Era as the period 1995-2007, but I'm amending that definition. The Bubble Era is now 1995-???

Later.

 

Is Canada's Tar Sands Expansion In Trouble?

Is Canada's tar sands expansion in trouble? Probably not, but the issue is complicated, so bear with me.

Back on November 9, 2012 I wrote a post called A Slowdown At The Tar Sands, noting that the economics of new projects had become "challenging" according to James Burkhard, head of oil-market research for oil consultancy IHS Cera. Bloomberg recently reported on a new development at the tar sands which confirms that diagnosis.

Total SA (FP), Europe’s third-biggest oil company, will book a $1.65 billion loss in the first quarter on the canceled Voyageur Upgrader project in Canada’s oil sands after selling its stake to Suncor Energy Inc.

More than $5 billion of investment in Voyageur over the next five years is “no longer justified from a strategic and economic point of view,” the Paris-based company said in a statement. The explorer will sell its 49 percent stake in the project to venture partner Suncor for $500 million.

Alberta oil sands are beset by rising labor costs and a shortage of workers as well as a discount for the price of Canadian heavy crude as U.S. oil output exceeds expectations. Suncor yesterday canceled the Voyageur venture after Chief Executive Officer Steve Williams said in December the profit margin for processing Alberta bitumen was “disappearing.”

Total’s decision to sell its stake “is the right one and made due to negative market conditions,” Oswald Clint, an analyst at Sanford C. Bernstein & Co., wrote in a report. It demonstrates “some level of capital discipline when project economics are no longer favorable.”

What does new tar sands oil cost in per-barrel terms? In short, how high must oil prices be to make the economics favorable? Here's a mining.com report from December 14, 2012.

Bitumen is expensive to extract, upgrade and refine and cannot compete with the many new shale oil plays which have pushed US production to its highest level in a decade.

Unlike oilsands oil, Bakken trades broadly in line with to WTI and the region is also competing for pipeline and refinery contracts with Alberta.

Apart from the boom in US production and a strong loonie – as the Canadian dollar is referred to by locals – Alberta's oil sands players are also threatened by escalating labor and equipment costs.

A recent report by research house Wood Mackenzie shows break-even costs for building new steam-driven [in-situ] projects is in the $65 – $70 a barrel range.

Mining developments – the truck and shovel method accounts for a fifth of all projects – need at least $90 – $100 oil.

Existing projects in Alberta can still make money at $45 a barrel.

Existing projects are not threatened, but new projects are. And here's a Globe & Mail report from June 4, 2012.

“Oil sands projects display some of the highest break-evens of all global upstream projects,” the firm said. “The potential for wide and volatile differentials could result in operators delaying or cancelling unsanctioned projects.”

New oil sands mines, for example, require prices of around $80 (U.S.) a barrel to break even, Wood Mackenzie found.

Add an upgrader, the “pre-refinery” that transforms heavy oil into a lighter crude that can be further refined into diesel and gasoline, and the needed break-even rises to above $100.

So-called “in situ” projects, which use wells and underground steam injection to extract oil sands crude, are less vulnerable, with a break even of about $60.

These mining breakeven prices are very high. Right now, WTI crude is trading at about $97/barrel and Brent is trading at about $111/barrel. New mining developments, including an upgrader, have a breakeven of about $100/barrel, which makes the economics very marginal indeed.

Some tar sands oil trades at a discount to WTI and thus Brent, which means that you can't get the benchmark price for it. This March 26, 2013 Reuters report tell us what Canadian crudes are selling for lately.

Canadian oil prices rose to the highest levels in more than five months on Tuesday in thin trading on strengthening demand and delayed new supplies.

Western Canada Select [WCS] heavy blend for May delivery last traded at $14.75 per barrel below West Texas Intermediate [WTi] according to Shorcan Energy Brokers. That compares with the settlement price on Monday of $16.40 below the benchmark.

Synthetic crude from the oil sands for May delivery last traded at $7.50 above WTI. Synthetic settled on Monday at $6.50 above the benchmark.

Prices for both crudes are the highest since October 12 and come as asphalt demand rises at the start of the summer paving season, increasing the use of heavy oil.

As well, synthetic supplies in May could be constrained by a planned maintenance shutdown at Suncor Energy Inc's 100,000 barrel per day Upgrader 1 unit at its northern Alberta project site expected to be carried out in the second quarter.

Heavy WCS, which is used to pave roads, trades at a considerable discount to WTI, while synthetic crude oil [SCO], which has been mined and upgraded, is currently trading at $6-7/barrel above the WTI benchmark, which is only a few bucks more than it costs to produce.

You don't have to be a rocket scientist to see that new mining projects requiring upgraders are not economically viable at current oil prices. That's why Total Chief Executive Officer Steve Williams said in December that the profit margin for processing mined Alberta bitumen was “disappearing.” However, in-situ production remains viable at current prices and likely future prices, as I will explain below.

In a related development, the U.S. State Department recently issued a report which gave the go-ahead to the Keystone XL pipeline. Needless to say, this finding made environmentalists apoplectic, as reported in The Guardian on March 2, 2013.

Green activists and climate change scientists have slammed a new report from the Obama administration that raises no serious objections to building a massive and controversial oil pipeline...

Michael Brune, executive director of the Sierra Club, said he was "outraged" by what he described as the administration's "deeply flawed analysis and what can only be interpreted as lip service to one of the greatest threats to our children's future: climate disruption".

[image left: in-situ oil production at the tar sands]

The State Department report concluded that the environmental costs of getting oil from Canada to the Gulf by other methods were more harmful to the environment. It evaluated two options using rail: shipping the oil on trains to existing pipelines or to oil tankers.

The report said these methods would release more greenhouse gases than the pipeline.

Obama is under strong pressure from the oil industry, business groups and the Canadian government to approve the project, which will open new outlets for the vast crude reserves of Alberta...

Here's the key paragraph in The Guardian story.

"The State Department is overlooking the fact that the pipeline is likely to trigger at least 450,000 barrels per day of additional tar sands production capacity," said Stephen Kretzmann, executive director of Oil Change International, in a statement.

Will the Keystone XL pipeline trigger 450,000 barrels-per-day of new capacity? Not if mining + upgrading is involved, as I've made clear above.

However, in-situ production using steam-assisted gravity drainage and other thermal methods, where operators steam-heat bitumen which lies 200-400 meters under the ground to convert it to heavy crude oil which will flow up to the wellhead, remains economically viable with a breakeven price of about $60/barrel, though it is not without problems.

According to a Scientific American report The Opposite of Mining: Tar Sands Steam Extraction Lessens Footprint, but Environmental Costs Remain, in-situ production surpassed mining production in 2011. In fact, "In 2011, Alberta's production of crude bitumen reached over 1.7 million barrels-per-day; of this surface mining accounted for 51 percent and in-situ for 49 percent. In 2011, about 57 percent of crude bitumen production was sent for upgrading to SCO in the province."

Producing in-situ oil emits more CO₂ than mining bitumen does.

The ultimate engineering challenge of the tar sands, however, may be coping with greenhouse gases. As a result of increasing in situ production, greenhouse gas emissions from Alberta's tar sands rose by 1.7 percent last year, and are up 16 percent since 2009, according to the Canadian Association of Petroleum Producers. The newly dominant in situ technology produces oil at a cost of 2.5 times more CO₂ emitted to the atmosphere than the more brute-force, conventional mining. Whereas this may be equivalent to what's emitted when using steam to flood out heavy oils in California or Nigeria, neither of those sources of greenhouse gases is growing as fast as the tar sands.

So, is Canada's tar sands expansion in trouble? Yes and no. New mining projects have poor economics, but the trend toward more in-situ production will likely continue, especially if the new pipeline is approved. And as the Scientific American report makes clear, in-situ technology is improving all the time. And what about the energy costs of producing stream-heated crude?

The key to in situ production is the steam/oil ratio which indicates how many barrels of steam it takes to produce one barrel of oil. This metric is important because it determines the level of emissions generated, operating costs, surface footprint size, capital efficiency, water intensity and water usage. At Christina Lake, Cenovus' SOR is around 2:1, which means they use about 2 barrels of steam to extract 1 barrel of oil, which reportedly leads the industry according to IHS data...

The steam is generated from burning natural gas in huge industrial boilers which accounts for a significant portion of an operation's capital costs.

So it's important to closely monitor steam input volumes to ensure the vaporized water is reaching the targeted oil sands reservoir, or pay zone. Greg Fagnan of Cenovus explained that their Produced Water to Steam Ratio (how much of the steam you inject in the ground comes back as produced water) is about 1:1 and they know something is wrong if this diverges, which likely means some of the steam is being lost to a pocket of gas or water known as a "thief zone." Ideally the Produced Water to Steam Ratio should be 1 barrel in 1 barrel out.

Although energy from natural gas is "a significant portion" of an in-situ operator's capital costs, the breakeven price of producing oil this way is still only about $60/barrel. The cheaper gas becomes, the more favorable the economics will be.

Thus it appears that "business-as-usual" will continue at the tar sands, especially if the Keystone XL pipeline is approved, which would create an additional incentive to produce in-situ oil at the tar sands. Once again, human technological cleverness has postponed a "peak oil" catastrophe at the cost of doing great damage to our Earthly environment.

More and more, that's exactly how I expect things to play out in the future.